About Me

Known principally for his weekly political columns and his commentaries on radio and television, Chris Trotter has spent most of his adult life either engaging in or writing about politics. He was the founding editor of The New Zealand Political Review (1992-2005) and in 2007 authored No Left Turn, a political history of New Zealand. Living in Auckland with his wife and daughter, Chris describes himself as an “Old New Zealander” – i.e. someone who remembers what the country was like before Rogernomics. He has created this blog as an archive for his published work and an outlet for his more elegiac musings. It takes its name from Bowalley Road, which runs past the North Otago farm where he spent the first nine years of his life. Enjoy.

Bowalley Road Rules

The blogosphere tends to be a very noisy, and all-too-often a very abusive, place. I intend Bowalley Road to be a much quieter, and certainly a more respectful, place.So, if you wish your comments to survive the moderation process, you will have to follow the Bowalley Road Rules.These are based on two very simple principles:Courtesy and Respect.Comments which are defamatory, vituperative, snide or hurtful will be removed, and the commentators responsible permanently banned.Anonymous comments will not be published. Real names are preferred. If this is not possible, however, commentators are asked to use a consistent pseudonym.Comments which are thoughtful, witty, creative and stimulating will be most welcome, becoming a permanent part of the Bowalley Road discourse.However, I do add this warning. If the blog seems in danger of being over-run by the usual far-Right suspects, I reserve the right to simply disable the Comments function, and will keep it that way until the perpetrators find somewhere more appropriate to vent their collective spleen.

Followers

Saturday, 31 January 2015

Can Democracy Save The Greeks?

Ode To Joy! Syriza supporters cheer as their party's victory is announced, But will the people of Greece be able to successfully reoccupy the democratic institutions emptied out by the twin evils of neoliberalism and austerity?

GREECE, the birthplace of democracy, is now the test of
whether democratic governments still possess the power to effect meaningful
change. If it passes the test, then the election of the left-wing Syriza Party,
on 26 January 2015, will mark the beginning of the end of the 30-year
neoliberal experiment. But, if it fails, then the growing perception that
democracy has become an empty shell, incapable of delivering anything more than
more of the same, will harden – not only in Greece, but across the whole world.

There are those who suggest that, when it comes to
democracy, the neoliberal doctrines of the political class have acted like a
neutron bomb. For those unfamiliar with the term, the neutron bomb was one of the
Cold War’s most abhorrent creations. It’s great “selling point” was that its
detonation, while killing human-beings by the million, would leave key
infrastructure intact. Ready and waiting, following a suitable interval, for
occupation and use by the “victors”.

According to the neutron bomb metaphor, neoliberalism has
eliminated the vital human elements of our democratic system. The mass
participation in political life for which New Zealand was justly famous
(roughly a tenth of our adult population once belonged to a political party and
the numbers voting frequently exceeded 90 percent of registered electors) has
dwindled dramatically, reducing our democratic institutions to empty, echoing
shells. The awful uniformity, both in terms of the political choices on offer,
and the politicians offering them, is thus explained.

The Syriza Party’s stunning victory in the Greek general
election is significant precisely because it has allowed the Greek people to
re-occupy their country’s democratic infrastructure. The resulting surge of
hope that has swept through the Greek population – evident in the highly
emotional responses of ordinary Greek citizens interviewed on the streets of
Athens by the world’s bemused media – is at once the new Prime Minister’s,
Alexis Tsipras’, greatest asset and the source of his greatest vulnerability.

The neoliberal financiers of the European Union are adamant
that the Greek people will not be released from the debt obligations imposed
upon them by the profligate borrowings of corrupt politicians more than a
decade ago. The devastating austerity programme overseen by the so-called
“Troika” (the European Central Bank, the European Commission and the
International Monetary Fund) which has seen unemployment soar to 1 in 4 of the
workforce, and the incomes of those lucky enough to still have a job slashed by
as much as 40 percent, must, according to Greece’s unyielding European creditors,
remain in force.

The neoliberal elites’ assumption has always been that by
forcing savage reductions in the size and scope of Greece’s public sector, the
confidence of her private sector would soar, investment would surge, and before
you could say “Long live the Eurozone!”, the Greek economy would have grown its
way back to prosperity.

In the real world, however, events have unfolded very
differently. Health cuts left the chronically ill without medicine. Wage cuts led
to mortgage defaults and homeless families. Confidence collapsed. Investment
dried up. Emigration soared. And when the desperate victims of austerity
protested, their political representatives, pledged to defend the almighty
Euro, called out the Riot Police.

When the Greeks voted-out the politicians responsible, they
discovered to their horror that the replacements were just as committed to
implementing the Troika’s austerity programme as their predecessors. When
tested, political parties nominally of the Left turned out to be practically indistinguishable
from their supposed ideological rivals on the Right. In the end, politicians
from the traditional parties felt obliged to join forces against what they saw
as the unrealistic and unreasonable demands of the electors. Isolated and
vilified as traitors, the Greek political class would have struggled to detect
the irony in Berthold Brecht’s famous suggestion that it might be easier for
the Government “To dissolve the people and elect another.”

Greece’s electors have now delivered their emphatic reply to
the brutal economic absolutism of successive neoliberal governments. The halls
of the democratic Greek Republic, for long the exclusive preserve of neoliberal
technocrats and their local political collaborators, are now ringing with the
excited voices of the Greek People.

And the peoples of the European Union, themselves no
strangers to the brutalities of austerity, are listening. If Syriza is to
succeed, it is to this audience that it must appeal.

This essay was
originally published in The Waikato Times, The Taranaki Daily News, The
Timaru Herald, The Otago Daily Times and The Greymouth Star of Friday, 30 January 2015.

I think you should familiarise yourself with the concept of "Odious Debt" http://en.wikipedia.org/wiki/Odious_debt Wayne. Something tells me we're going to be hearing a lot more about it in the months ahead.

Yes I am familiar with the concept. In fact my PhD dissertation on the Iran US Claims Tribunal covers the issue. One of the outcomes of the various international claims tribunals of the 1980's and international settlements with the Eastern Europe countries is that nations could not unilaterally convert debt and contract obligations into "aid" without the consent of the other party. An example was the Czech US settlement of 1982, in which the Czechs agreed to pay 100% of the debts that they owed to the US from the borrowings from the 1920's and 1930's. It was the first real sign of the socialist nivarna of Eastern Europe cracking.

I do not think this basic precept will be under any serious threat, which is not to say there won't be major negotiations between Greece and the EU.

In my view Greece could repudiate its debts (at least a proportion thereof) and still keep the Euro. It would however not be able to borrow on the international markets for quite some time, say up to two decades. If Greece can maintain a primary surplus they could get away with the repudiation, but I do not see how they could restore all the social entitlements. After all they could not borrow internationally to fund them. They would have to either get it from tax or from local borrowing.

If Greece does go down this path, it will be a lot easier if they revert to the drachma. International debt markets may re-open for them quite quickly.

If the allies could forgive 50% of Germany's debt in 1953 and state that only 6% of their export revenue was to be used to repay the remainder then what is good for the goose is good for the gander. What has been done to the people of Europe is just appalling. Mind you the saying that Germany is trying to do with Banks what it couldn't do without tanks has, I believe, some truth to it. I do hope Greece gets out of the Euro. It is it's only chance to get the economy growing.

Spengler was prophetic He saw democracy as the political tool of money. He wrote, “The private powers of the economy want free paths for their acquisition of great resources. No legislation must stand in their way. They want to make the laws themselves in their own interests, and to that end they make use of the tool they have built for themselves, democracy, the subsidised party.” As we now gaze with awful fascination at “the empty shell” not only of democracy but of so called civilisation and human meaning, along comes Alexis Tsipras and the victory of Syriza.Alex Andreou writing for 'The Guardian' of Jan.26th. put it better than I could. “ "Everyone understands the wider debate better now. We anthropomorphise the abstract on the news – “markets are sceptical”, “markets are nervous”, “markets are angry” – and offer human sacrifice to the volcano. It is a sort of free-market fundamentalism with a religiosity in tone as extreme as any caliphate’s........Syriza’s ideas may prove unworkable. The leviathan of politics may swallow its politicians and regurgitate them wearing the same ties and telling the same lies as those before them. But this election was about putting down a marker. About saying “no more”." So Greece will be eased a little out of its present predicament because the young and charismatic Tsipras and his Greek- Australian tough looking but literary finance minister Yannis Varoufakis are strong new kids on the block and will give the greying ranks of Eurozone banking flesh a run for their money. There may be a new tide of real change coming but as Spengler predicted, “Nature becomes exhausted, the globe sacrificed to Faustian thinking in energies.” I suspect that, as Spengler also wrote, “Money is overthrown and abolished by blood. Life is alpha and omega, the cosmic onflow in microcosmic form.” Everything will be sacrificed in the tsunami which re-establishes the human right to exist without the paracitic burden of monetarists.

http://www.theguardian.com/world/2015/jan/26/greece-dignity-why-i-voted-for-syriza-alex-andreou Thank you Gnossienne for drawing my attention to the above piece which I had missed...I attach the link in defiance of those gods of the new religion.

Greece has already had theyre debt obligations vastly reduced by extending the repayment dates and amounts and still they want more - a complete right off no less - and somehow borrowing money frittering it away on high living and refusing to repay your debts is 'democratic'. Only a trotterian lunatic left could pen such nonsense with a straight face.

Big people who borrow money repay it chris - lesson learnt.

Sypris sounds great but he has absolutely no room for maneuver, 70% of the greeks want to remain in the euro to do so they are bound to adopt a fiscal policy which satisfies various measures of fiscal probity, they are part of the single currency and thus have no ability to devalue or set interest rates - the only way to adjust is structurally using supply side reforms (neoliberal policy in trotterian parlance).

Already the threat of Syriza has pushed up local interest rates and depressed bank shares, there is also capital flight as people withdraw money from greek banks in anticipation of the inevitable grexit.

If Syriza press on with 'democratic-profiligacy' the greeks will exit the euro, theyre vast euro denominated debt will increase vastly as theyre new currency slides relative to the euro and theyre banks will collapse defaulting on debt obligations.

This will shut them out of external debt markets, syriza will undoubtably resort to democratic-financing ie printing money resulting in hyper inflation.

My only hope for greece is they manage to stay in the EU and are able to trade theyre way back to some path to prosperity, with nutters like sypris in charge thats unlikely

I've read that Greece has defaulted on its debt eight times in the last 200 years. Media reports refer to widespread tax evasion and secret deals to keep borrowing off official accounts in breach of the Maastricht treaty obligations. To the casual observer, it appears as though Greece has dishonestly mismanaged its financial affairs for many years - but perhaps the Euro makes the situation more complicated than it looks.

While I would accept that fiscal austerity is doing a lot of unnecessary harm, I can understand why the EU has asked Greece to make significant changes.

Stop talking about greases if they're all complicit in the corrupt banking system that seems to have fucked the world economy in 2008. Their leaders are corrupt, and everyone who doesn't get stuck with PAYE avoids tax. But there you go that's the middle-class. And if austerity hasn't worked in 5 years, when is it going to? Christ even the governor of the Bank of England's come out against it by now. Doesn't work, never will. It's partly that the economists that give advice to governments are as corrupt as the governments themselves.

Yet another example, Anonymous, of someone purporting to own a "big person's" understanding of the world without the slightest evidence.

Germany, Greece's principal creditor, had its own debts forgiven by its capitalist creditors in 1953. The latter feared, quite rightly, that any insistence on full repayment of pre-WWII debts would likely reproduce exactly the same conditions as those created by the ruthless enforcement of WWI reparations. Conditions which facilitated greatly the rise of the Nazis.

In the late-19th Century, the United States, which, I assume, Anonymous, you regard as the natural habitat of "big people", itself refused to countenance the repayment of the loans which its new protectorate, Cuba, had received whilst under Spanish control. The US described Cuba's obligations as "odious debt", which, because it had not been incurred democratically by the Cuban people, the country was under no moral obligation to honour.

Research, Anonymous, it's what "big people" do before they shoot their mouths off. It also helps if, in addition to doing a little background reading, they make some effort to master basic spelling and grammar.

"Mind you the saying that Germany is trying to do with Banks what it couldn't do without tanks has, I believe, some truth to it."

I think you'll find that it's neo-liberal austerity and not nationalist expansionism that rules the roost in Berlin.

It's certainly a misguided mindset and is ravaging the lives of millions. But it's aim is to placate parsimonious and resentful German taxpayers and thus hang onto office rather than to create a Fourth Reich.

Chris big people who borrow repay, little children and trenchant lefties obviously dont. If Greece has her debts written off, so will spain, italy and france and the german tax payers will take a bath - Im doubting they play ball.

Greece will either endure long slow austerity and structural adjustment (neoliberal reform in kiddiespeak) or grexit and face an huge depreciation of the drachma and escalation of euro denominated debt - neither option is pleasant - the cruel reality of the real world, which will happen irrespective of childish voting decisions.

Greece, by kowtowing to the ECB, the European Commission and the IMF is in deeper debt now than it was five years ago. This is what happens, apparently, when "big people" are placed in charge.

You and your kind, Anonymous, have no answers to the real problems confronting Europe - other than more of the same.

Your moral bankruptcy, moreover, is as dire as Greece's financial woes. When people start describing democracy as "childish voting decisions" it's time to start questioning exactly what kind of society Neoliberals of your ilk are driving us towards.

The idea that a whole people can be placed on the rack to atone for the corrupt decisions of a handful of reckless politicians and bankers is abhorrent to all but those who lack even the rudiments of an ethical sense.

a little not so light reading for annon...https://www.fidh.org/IMG/pdf/grece646a2014.pdf.....all this on the massive average taxed individual earnings of 1004 euros a month...those feckless, tax avoiding good for nothing Greeks...you sad individual

Chris, can you clarify exactly what you think should happen now. It appears to be that you think the EU should simply write-off the existing loans. And then the EU should just start sending truckloads of money to Greece. Why bother with the overhead of loan documents if there is no expectation that they will ever be paid back anyway. To be fair, the EU should also write-off the loans to Portugal, Italy and Spain - they are struggling too.

People who lend money take the risk it will never be paid back. That's capitalism. They either charge a lot of interest to make up for the risk, or they insure it somehow. Whatever – I don't see why they should be insulated from this. It's how capitalism works – you pays your money you takes your chances.Anyway, nobody is going to be sending "truckloads" of money anywhere. Presumably it will be negotiated in a gentlemanly fashion. And then there will be a keystroke on a computer :-).

I think it was in 2010 that Germany finally paid off its World War One reparations (not that I think it should have been landed with them in the first place).

By that time, payments had been rescheduled several times, converted into a complex US loan and bond-selling operation in the 1920s, repudiated by Der Fuehrer in the 1930s and re-accepted by West Germany in the post-war period.

Germany didn't pay all the interest liable on the bonds. Even so, contractual propriety was adequately served, without the country's phenomenal post-war recovery or its subsequent largely successful integration of the former DDR being stymied.

So why not a similar deal for Greece?

The important thing is to get the wheels of commerce turning again, as quickly as possible, before the rest of southern Europe experiences a crisis of similar or greater magnitude.

And the other important thing is to seek practical solutions, rather than indulging in redundant moralising about the alleged inadequacies of debtors.

An oldish, informal Guardian poll found that many of its readers - decent folk - don't agree that German taxpayers should be asked to finance the profligacy of the Greek state. I think there's a general reluctance to allow borrowers to disclaim their obligations after funds have been advanced in good faith. I'm yet to be convinced that this is an odious debt scenario - I'm also not completely familiar with the role the Euro and the Greek banking sector is playing in all this.

I've seen it suggested that some kind of write-down - however it may be structured - is inevitable. Whatever the final outcome, I doubt that the international community will be particularly sympathetic if Greece was to put itself in this situation again.

I'm not a regular reader, but this Economist piece broadly sums up my views: http://www.economist.com/blogs/buttonwood/2015/02/greece-and-euro-crisis

TL;DR: agree that austerity is contractionary and causing harm; agree that some additional relief will be needed but am unhappy with the pattern of Greece's behaviour, agree with EU that this must not happen again, not convinced vote gets Greeks off hook.

even the Tories can see the truth of the situation...and thats saying something http://www.telegraph.co.uk/finance/economics/11384987/Germany-will-have-to-yield-in-dangerous-game-of-chicken-with-Greece.html

The Economist article is, to my mind, right concerning Stiglitz's comment on Democracy.

German voters obviously should have as much right as Greek voters to have their views listened to. And there are certainly far more of the former than of the latter.

But Stiglitz's arguments against austerity are otherwise valid and very well put, even by his high standards.

Furthermore, the current German taste for austerity is neither rational nor in Germany's own best interest. Nor, more specifically, is German policy towards Greece.

Crucial to this issue is the German phobia about inflation, which dates back to 1923, when you needed a cartload of Reichsmarks to buy a loaf of bread.

Many, perhaps most, Germans believe that the Great Inflation led directly to the Third Reich. Hence, behind the fear of financial profligacy lies a deeper fear of political instability and extremism.

In the light of history, I can certainly understand these concerns. Yet, the resulting mindset ignores the fact that depression and deflation, after 1929, were much more immediate causes of the Nazi seizure of power than was the slightly earlier experience of runaway inflation.

This same mindset, meanwhile, tends to reinforce a frugality and self-discipline that are well-entrenched parts of German culture (if not of the crowd in the pub I used to frequent).

At the same time, there seems to be a mood of (by post war standards) unusual truculence in Germany at present.

Having been model international citizens for six decades, there's now, as far as I can make out, a widespread feeling that Germans can't keep on putting their own interests to one side out of guilt or the desire to be loved.

This view may not win plaudits in Athens or Thessaloniki. But German politicians have to win votes in Leipzig and Augsburg.

Overall, I suspect that these culturally-specific factors are rather more powerful drivers of German austerity than the rather un-German creed of neo-liberalism, imported of recent years from the Anglosphere, although this too has undoubtedly played a role.

But the fact remains that austerity is harming Germany as well as the rest of Europe!

It's harming Germany because European markets are, obviously, poorer and less able to purchase its exports.

Meanwhile, the long-running uncertainty over Greece and the Eurozone is impacting on global recovery and helping to stymie German trade in markets beyond Europe.

And who knows what the consequences of 'Grexit' would be for the 'European Project', which has long been a pillar of German democracy and prosperity?

Moreover, austerity is also making Germany's economy less competitive and particularly so in comparison to those countries that have engaged in 'quantitative easing'.

Investment in research and development is uncharacteristically low, at present, whilst the country's long -standing reputation for educational excellence is on the skids.

In addition, many Germans, like others across Europe, are suffering the day-to-day traumas normally associated with falling welfare budgets and tighter benefit regimes.

Of course, they're better off than their equivalents in Spain or Ireland, let alone in Greece! But that's not, necessarily, what concerns them most.

And, in Germany as elsewhere, austerity tends to suck money out of the domestic economy, dampening demand and circumscribing prosperity. This may not yet be fully apparent as there's a lot of accumulated fat still around. But for how much longer?

As you would expect, all of the above is helping to grow the very forces of extremism, nationalism and instability that Chancellor Merkel rightly worries about.

However, she seems inhibited by a culturally and electorally-induced unwillingness to reach the logical conclusion.

There is one simple truth that the austerity pundits conveniently overlook...you can cut and reduce costs and deficits to improve your international competitiveness to grow your economy through increased export receipts but for every export led economy there has to be a recipient......and crucially that recipient has to be able to pay....and when everyone one wants to be an export led economy to whom do you export? Defaults are preordained.